Going Long on a Call Spread with BABA
Based on the chart and three math models -- ARIMA(5,2,1), ARIMA(0,1,0), and Monte Carlo simulation using past 100 trading days -- BABA was trading below its expected projected value by over 5% prior to January 2nd. Projecting forward 20 days, the expected 20 day forecast from the Monte Carlo is 189 with a return volatility of 12%. Additionally, this is supported by the ARIMA(5,2,1) forecast with an expected value of 187. The chart also indicats an upward trend in the form of a wedge with a strong resistance at ~165.
From a fundamental standpoint, BABA shows significant operating margin of over 30%. This outperforms both AMZN and EBAY operating margin which are sitting at 4% and 26% respectively. Additionally, a growing middle class in Asia and multiple "Buy" ratings from analysts further support the stocks growth. One should keep a close eye on the Chinese econometrics as this could have a stronger impact on the BABA stock than metrics from the U.S. economy. On a more recent note, the Trump tax plan shouldn't have a significant effect on the stock.
From a fundamental standpoint, BABA shows significant operating margin of over 30%. This outperforms both AMZN and EBAY operating margin which are sitting at 4% and 26% respectively. Additionally, a growing middle class in Asia and multiple "Buy" ratings from analysts further support the stocks growth. One should keep a close eye on the Chinese econometrics as this could have a stronger impact on the BABA stock than metrics from the U.S. economy. On a more recent note, the Trump tax plan shouldn't have a significant effect on the stock.
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Closed positions on 170, 175, and 180 Calls when BABA hit $195.
80 to 120% return on positions.
80 to 120% return on positions.